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Non Resident Tax Withholding

Non Resident Tax Withholding 

Non Resident Tax Withholding

Section 195(1)

• Any person responsible for paying to a; (payer)

• A Non resident, not being a company or to a foreign company ; (payee)

• Any Interest (not being interest referred to in section 194LB or section 194LC or section 194LD) or other sum chargeable (not being income chargeable under the head Salaries) under the provisions of the Act;

• Shall at the time of credit or payment whichever is earlier;

• Of the subject payment;

• Shall deduct the tax at rates in force.

Features of section 195 as compared to other TDS provisions

• Unlike personal payments exempted in section 194C etc; no exclusion for the same in section 195 (all payments covered excl salaries) eg payment to foreign architect for residential house construction etc.

•Unlike threshold criteria specified in section 194C etc, no basic limit in section 195; even Re 1 payment is covered.

•All payers covered irrespective of legal character HUF; Individual etc.

• Multi-dimensional Section as it involves understanding of DTAA/Treaty.

• Unlike other provisions in Chapter XVII (TDS provisions), section 195 uses a special phrase to tax under the.

• Hence the crux of the Section is that the Payer has to step in the shoes of the Assessing Officer and know whether the income is chargeable to tax or not ?.

Rule 37BB

The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificate from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961

CBDT vide notification 67/2013 revised the rules and procedures for payment to a nonresident, not being a company, or to a foreign company. The amended rule came into force from 1 st October, 2013.

Revised rule provides that the person responsible for making any payment to a non-resident, not being a company, or to a foreign company including any interest or salary or any other sum chargeable to tax under the provisions of the Act shall be required to furnish details in prescribed form.

Section 195(6) as amended by Finance Bill, 2015

With effect from 1st June, 2015, Section 195(6) is substituted by following Provision:

DzThe person responsible for paying to a non-resident, (not being a company), or to a foreign company, any sum, whether or not chargeable under the provision of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed.dz

RESIDENTIAL STATUS & TAXABILITY

–Resident & Ordinarily Resident [Section 5(1)]

•Global Income Taxable

–Resident But Not Ordinarily Resident [Section 5(1) read with Proviso to Section 5(1)(c)]

• Income received or deemed to be received in India or .

• Income accrues or arises or deemed to accrue or arise in India OR .

• Income derived from a business controlled in or a profession set up in India.

–Non Resident [Section 5(2)]

• Only income received or deemed to be received in India or accrues or arises or deemed to accrue or arise in India.

Non Resident Tax Withholding 

Non Resident Tax Withholding

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